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  • irishtimes.com - Posted: July 10, 2009 @ 4:38 pm

    Neither Capitalism nor Socialism but … what?

    Deaglán de Bréadún

    A friend of mine is fond of quoting the American humorist and commentator, the late H.L. Mencken, who said that, “If all the economists were laid end to end, they still wouldn’t reach a conclusion”.


    Bright Intelligent Fellow From Offaly meets Ban the Man (Photograph by Dara Mac Dónaill)

    Professor Amartya Sen is a Nobel Prizewinning economist who does reach conclusions. Maybe that’s why he got the Nobel gong. In any case, he gave a lecture at Trinity College Dublin that was notable for its lucidity – a rare enough quality in outpourings from the economic high priests.

    His message was that the world economy is in a fix. There was too much deregulation. Capitalism, at least in its unadulterated form, doesn’t work. But neither did Soviet-style Socialism. We need a new system, which he didn’t name. It sounded like the Social Market – essentially capitalist but with an interventionist welfare State.

    None of this was particularly original, it has to be said. But it was cheering to hear a leading economist saying something other than, “We gotta zilch those expensive poverty programmes to get the world back on track.”

    Professor Sen dwelt at length on the thoughts and career of Adam Smith (1723-90). Often seen as the prime ideologue of Capitalism, Smith was much more complex than most people realise. Sen quoted the opening sentence from, The Theory of Moral Sentiments (published 1759),  the first book the Scottish philosopher-economist wrote: “How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it.”

    This is a profound and even moving thought. Perhaps – at the risk of sounding Monty Pythonesque – Smith is here expressing the Meaning of Life itself. You do good for others, just for the sake of it and with no expectation of any return.

    The Sen lecture was chaired by our former president, Mary Robinson, in her capacity as Chancellor of Trinity College. Two thoughts struck me as I sat there. 1) Isn’t it about time Mary Robinson got the Nobel Peace Prize? 2) My mind was carried back to a rather more dramatic gathering in another part of Trinity, way back in the mid-1970s.

    That was at a time when the Coalition government of the day, led by Liam Cosgrave, seemed to many as if it was about to abolish our cherished and dearly-held civil liberties. This was the period when a Garda “Heavy Gang” was allegedly beating up suspected trainrobbers and other members or associates of republican paramilitary groups and when it looked as if the death penalty was about to be used against a couple – Noel and Marie Murray – who were described as anarchists and had been convicted of the appalling murder of a Garda during a bank robbery in Dublin.

    Mary Robinson spoke out loud and clear, saying members of the Oireachtas should be “like misers with gold” when it came to the fundamental freedoms in Bunreacht na hÉireann. The legendary Kader Asmal, then a Trinity law lecturer and later a government minister in post-apartheid South Africa, used the occasion to promote a new organisation, the Irish Council for Civil Liberties, which is still highly active today and has been lobbying energetically against the Criminal Justice (Amendment) Bill providing for gangland crime cases to  be tried without a jury. (Since writing the above, I have found a news report on that meeting in The Irish Times of 6 September 1976: it was called to  protest at the then-government’s introduction of a State of Emergency, which led to the seven-day detention provisions that were allegedly used by the “Heavy Gang” to ill-treat persons in custody.)

    But to return to Professor Sen. He seemed to regard Soviet-style socialism as the only model. But the traditional version was and is quite different. In fact, the classical socialists and Marxists were quite horrified by the Bolshevik coup of October 1917 and the subsequent attempt to leapfrog the “bourgeois democratic” stage in Russia by going straight from feudalism to socialism or communism.

    As I understand it, the classical socialist view was that a party based on the labour and trade union movement would come to power by democratic means and introduce the changes necessary to create a fair and equal society. But there would continue to be elections and the people would have the option of throwing out this party and replacing it with a pro-capitalist one if they wished. That’s democracy. Even someone as far left as Rosa Luxemburg believed in this approach. The post-war Attlee government in Britain is probably the classic example, bringing in free healthcare and a myriad other changes and then giving way to the  Tories when the people so decreed.

    Professor Sen was not the only prominent international figure who visited our shores this week. We also had Ban ki-Moon, Secretary General of the United Nations, who was here for two days. Whatever his record on practical issues, he cuts a less-impressive figure than his predecessor Kofi Annan, who spoke English fluently and well and carried himself with great dignity and grace. Ban is quieter and more low-key although it has to be said that he seems to have gotten the UN through the period when you could hardly  turn to the foreign page of a serious paper without reading about another alleged financial scandal. Ban looks the part of Secretary General but his English is pretty feeble: you don’t have to be a cultural imperialist to expect the world’s top civil servant to have a better grasp of the main  international language.

    The commitment of this State and its institutions to the UN is impressive and close to 90 Irish personnel have died on peacekeeping duties for the  international organisation. Yet the general public know very little about the world body and the grand old vision of The Parliament of Man, like the classical concept of socialism, seems to have gotten buried in the mists of time.

    For I dipt into the future, far as human eye could see,
    Saw the vision of the world, and all the wonder that would be;
    Saw the heavens fill with commerce, argosies of magic sails,
    Pilots of the purple twilight, dropping down with costly bales;
    Heard the heavens fill with shouting, and there rain’d a ghastly dew
    From the nations’ airy navies grappling in the central blue;
    Far along the world-wide whisper of the south-wind rushing warm,
    With the standards of the peoples plunging thro’ the thunder-storm;
    Till the war-drum throbbed no longer, and the battle-flags were furl’d
    In the Parliament of man, the Federation of the world.
    There the common sense of most shall hold a fretful realm in awe,
    And the kindly earth shall slumber, lapt in universal law.

    (From Alfred Lord Tennyson’s Locksley Hall)

    • Liam says:

      Since when have he had capitalism in its “unadulterated form”?. If it wasnt govt. policy for the Fed and other central banks to try avoid every recession, the excesses would never have built up in the first place.

    • Deaglán says:

      I think most people would agree that capitalism has been given pretty free rein since the days of Thatcher and Reagan and that the lack of meaningful regulation and supervision over the financial sector has been a major factor in our current grave economic difficulties.

    • Joanna Tuffy says:

      That thing you are searching for between capitalism and (state) socialism – it is very compatable with democratic socialism as implemented by the British Labour Party when led by Clement Atlee in Government 1945-1951.

      It is not about social markets but rather about deciding, based on socialist values such as solidarity, what areas of our collective lives the market has no place in, such as healthcare. Hence the establishment of the NHS, which survived that Government’s term in power. This year’s BBC Reith Lectures by Professor Michael Sander capture this type of politics and are well worth listening too especially lecture number 4 the link to which I attach:


    • Don Mac Donald says:

      I am baffled over all the guff about how to find an acceptable economic model, as though deciding this were rocket science. Professor Sen is typical. He acknowledges that unadulterated capitalism doesn’t work and adds “But neither did Soviet-style Socialism” and that “We need a new system, which he didn’t name.”
      Why not name it? It is the social democratic model, the one found in all the Scandinavian countries and in its best version here in Norway. Here we pay a fair amount of taxes but in return have decent public health, decent social security including unemployment benefit, free education (though a part of the grants at tertiary level have to be paid back, so that it is normal for young marrieds to owe the state money, which they pay off over time). There are very very few enormously rich (though the international pressure for free markets has led to some growth in these) and correspondingly few poor. Pensions are decent. Our politicians are not paid enormous wages and are not corrupt. And the foundation for all of this is an extreme egalitarianism (To Illustrate: Gro Harlem Brundtland, when prime minister, tried to arrange for top-ranking politicians to have the right to drive in the bus lanes because their job was so important. The healthy explosion of rage from the citizens caused her to drop that idea pretty damn quick, and get back in the queues with everyone else.) Oh, and Norway is one of the 2-3 richest countries on earth. The oil helped here, but we were doing very nicely before ever it was discovered.
      What more can a society want? A similar arrangement would suit the Irish people down to the ground – though I expect a lot of fat cats would hate losing their cream.
      Don Mac Donald, Oslo

    • Deaglán says:

      They’re very interesting comments, Joanna and Don. I remember coming back from an assignment in Denmark some years ago, fired up with enthusiasm for their approach of taxing heavily in order to finance truly excellent welfare provisions. A colleague rather cynically suggested that similarly-high taxes in Ireland would be wasted or otherwise dissipated by our feckless political leaders.

    • Liam says:

      Deaglán , where the market has been very unfree is in the role of central banks. I could go back earlier but Greenspan’s Long-Term Capital Management bailout with the threat of the systemic collapse of the financial system set a very bad precedent. The “Greenspan put” combined with ultra-low US interest policies after the dot-com collapse was fuel to the fire for this.
      If the bartender is determined to make everyone drunk on cheap credit, then take the keys and slash the tires for sure, but there are better ways

    • Niall says:

      Like Don, I’m frustrated by the fact that people speak as though the alternative to capitalism is some sort of Soviet-style system. It’s not, and it never was. There are plenty of states doing better than us who have benefited from forms of socialism.

      The unfortunate thing about most of the economists we tend to hear from in Ireland is that they take it as a given that the state is essentially less efficient than a private company and that there is no alternative to capitalism.

      A few months ago, I recall hearing a debate on a radio station about nationalising the banks. The economists all concluded that nationalisation was the worst possible option, and that, should a bank have to be nationalised, then we should privatise it at the earliest possible convenience.

      Why? Because, they argued, nationalised banks had been tried, and failed. Now I’m not attached to the notion that we should nationalise the banks, but it seems to me that had the gentlemen applied the same kind of logic when examining the current state of non-nationalised banks, they would have come to the conclusion that the current model, the one they’d advocated, had also failed and should not be returned to.

      In general, if you ask economists why a state-run system failed, it’s because it is essentially flawed and inefficient, while whenever a privately-owned system failed, it’s because of accidental properties that were particular to a given system.

    • Diarmuid says:

      Re:Don Mac Donald, Oslo

      That sounds like a great system.

      Can you send us a couple of billion barrels of your oil and gas to pay for it like Norway does?

    • Betterworld Now says:

      I suggest that you have a look at South America for your answer, not Scandinavia and certainly not oil-soaked Norway where 4.5 million people share the mineral wealth of a vast country and an even vaster (if there is such a word) sea.
      If we were to follow the Norwegian example we’d leave the EU, leave the Eurozone, nationalise our offshore oil and gas, reclaim our 200mile fishing limit, export more oil than Saudi Arabia and save €65,000 per person per year to fund their pension. No, Norway is off the scale of ‘unique’; don’t even think about trying to follow them.

      Sweden and Finland have both recovered from disastrous economic collapses in the past two decades (lucky them – the timing of their collapses allowed them subsequently to inflate their economies at a time of global economic expansion). And Denmark is the most heavily taxed country on the planet in spite of being the 39th biggest exporter of oil. Ireland has no oil and just about enough gas to keep the lights on in Cork for the next 10 years.

      We need an Irish solution to an Irish problem.

      We have to create a cohesive society based on participatory democracy before we will ever reach agreement on the economic engine we want to install in it. Posing an ‘either/or’ question (state communism vs casino capitalism) is to use a frame of reference which is both outdated and far too limited – hence the need to refer back to a British government of 1945. Arguing over the type of engine is a diversion from the real issue – what type of society do we wish to hand on to our children?

      Let’s start by agreeing that the outcome of our discussion will be unique to Ireland, not an adopted model from anywhere, certainly not an imposed orthodoxy from any external superpower or superstate. If the people of Ireland do not take ownership of the change process (and, whether they accept it or not, make no mistake that we are just at the beginning of the largest change in Irish society since the 1916 Rising) then it will fail and the country will be plunged into strife and economic collapse.

      However, I fear that our current political class is just not up to the job, and our democratic institutions are clearly holed below the waterline.

      How else can you explain the guillotining of 18 pieces of legislation through the Dáil on the eve of the summer holidays in an atmosphere of raucous giddiness? Surely this is a parliamentary feat, and a model of legislative behaviour, worthy of a certain elected German chancellor who subsequently went on to lay waste to a continent?

      Having effected government by decree, what more power will Dermot Ahern be able to wield when the government declares a state of emergency? I suggest he is already salivating over the list.

    • Matthew says:

      Thanks for a very interesting article.
      In relation to the UN, two quick points…
      The corruption in the UN was a political game used by members of the Bush administration to discredit the UN and bypass international law. The scale of the corruption in the UN oil-for-food programme is miniscule when compared to the cosy deals of the American financed reconstruction…
      Secondly, although Ireland can rightly be proud of its contribution to the UN, the current reality does not look so great. Ireland is failing to honour its pledges to fund UN agencies – in some cases cutting funding by up to 50%! The failure to reach the often-repeated commitment to give 0.7% of GNP as Official Development Assistance (ODA) is already well known.
      Thanks again for an interesting article, but let’s keep up the pressure on the government and not rest on our laurels.

    • Desmond FitzGerald says:

      Don’t forget Norway hasn’t actually spent its oil money but instead invested it in Sovereign Fund. So Norway managed to create one of the best examples of how a state should be run despite – not because – of having billions of profits from oil.

      Whereas the UK just squandered its oil revenues to create a low tax, inefficient, poorly run public service, bloated badly run and unaccountable political system, vastly unequal, property bubble, boom and bust state.

      The thickos in Ireland then simply repeat every policy mistake the UK made and to add to it simply give away control of the small amount of natural resources we have to Shell instead of giving Shell access to the gas while the state retained ownership and control of the resources.

      But the vital issue which needs to be addressed in Ireland, before anything else, is why the thick Irish public keep re-electing such gombeens to power.

      The Irish have no one but themselves to blame. FF didn’t have to steal power in fake elections, it doesn’t tamper with ballot boxes and Ireland has a fully free media so we all know about the corruption and dig-outs and back handers and at least 60% of Oireachtas members are not fit to be in their jobs.

      Yet despite this, people still continue to vote FF and then wonder why the country is so corrupt and why the public secotr is so inefficient.

      Are Irish people really so stupid they don’t understand?

    • Frank Jameson says:

      I seem to remember an opinion poll in Ireland a few years back. It showed that the Irish people wanted high social benefits and low taxes. Now what would you call that system?

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